Qualcomm clears decks for Broadcom probe

Qualcomm accused Broadcom of using rhetoric “to trivialise and ignore serious regulatory and national security concerns”, after a key shareholder meeting was delayed due to a government probe.

In a statement, Qualcomm said it adjourned its annual meeting of shareholders to 5 April 2018 after receiving an order from the Committee on Foreign Investment in the US (CFIUS), which will probe whether Broadcom’s proposed takeover of the company poses a threat to national security.

The shareholder meeting, originally scheduled to be held today (6 March), is crucial to determining the company’s future. Shareholders were due to vote on the appointment of six new board members proposed by Broadcom as the company attempts to push through a takeover.

Broadcom made its first move on Qualcomm in November 2017 and since amended its offer several times following opposition from Qualcomm’s management: the current bid stands at $79 per share.

CFIUS squabble
Singapore-based Broadcom reacted strongly to news of CFIUS’ probe, stating Qualcomm had secretly requested the investigation in January and the move represented “a blatant, desperate act” to prevent stockholders from voting in the upcoming meeting.

Qualcomm hit back, stating Broadcom’s response to the CFIUS investigation “is a continuation of its now familiar pattern of deliberately seeking to mislead shareholders and the general public”.

“CFIUS has determined that there are national security risks to the US as a result of and in connection with the transaction proposed by Broadcom,” the company stated, adding: “Broadcom’s dismissive rhetoric notwithstanding, this is a very serious matter for both Qualcomm and Broadcom.”

Broadcom maintains its proposed takeover should not be subject to a probe by CFIUS. The company was previously based in the US before being domiciled to Singapore in 2015 following a takeover. The company now plans to move back to the US in fiscal Q2 2018 (the three months to end-April), meaning the deal would not be an overseas takeover and, thus, would not fall under CFIUS’ jurisdiction.